Question

Collier Manufacturing Co. operates on a modified wage plan. During
one week’s operation, the following direct labor costs were incurred:
Units Completed
Employee
Piece Rate per
100 UnitsMTWTF
A. Travis. . . . . .$1.206,8007,1006,5008,0004,800
L. Nessman . . .1.106,3006,4002,9002,8007,000
B. Smithers . . .1.306,2006,1007,1006,0002,800
The employees are machine operators. Piece rates vary with
the kind of product being produced. A minimum of $70 per day is
guaranteed to each employee by union contract.
Required:
1.ComputetheweeklyearningsforTravis,Nessman,and
Smithers.
2.Prepare journal entries to:
a.record the week’s payroll, assuming that none of the
employees has achieved the maximum base wage for FICA
taxes. The income tax withheld for each employee amounts
to 10% of gross wages.
b.record payment of the payroll.
c.record the employer’s share of payroll taxes, assuming that
none of the employees has achieved the maximum base
wage for FICA or unemployment taxes.

Answer 1

As it is mentioned in the question each employee gets daily piece wages as per the individual piece rates (employee piece rate per 100 units) subject to minimum $70 per day. First we compute employee piece rate per unit. Thereafter, we will have to calculate the daily wages by multiplying no. of units produced by piece rate per unit.

Travis:

Employee piece rate unit:

$1.206 for 100 units

Therefore, piece rate for 1 unit $ 1.206/100=$ 0.01206

Daily wages calculation:

Monday: 8007 units x $ 0.01206= $ 96.56 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 96.56

Tuesday: 1006 units x $ 0.01206= $ 12.13 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Wednesday: 5008 units x $ 0.01206= $ 60.40 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Thursday: 0004 units x $ 0.01206= $ 0.05 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Friday: 800 units x $ 0.01206= $ 9.65 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Total weekly earnings: $(96.56+70+70+70+70)= $ 376.56

Nessman:

Employee piece rate unit:

$ 1.106 for 100 units

Therefore, piece rate for 1 unit $ 1.106/100= $ 0.01106

Daily wages calculation:

Monday: 3006 units x $ 0.01106= $ 33.25 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Tuesday: 4002 units x $ 0.01106= $ 44.26 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Wednesday: 9002 units x $ 0.01106= $ 99.56 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 99.56

Thursday: 8007 units x $ 0.01106= $ 88.56 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 88.56

Friday: 0 units x $ 0.01106= $ 0 or $ 70 whichever is higher, hence, $ 70

Total weekly earnings: $(70+70+99.56+88.56+70)= $ 398.12

Smithers:

Employee piece rate unit:

$ 1.306 for 100 units

Therefore piece rate for 1 unit $ 1.306/100= $ 0.01306

Daily wages calculation:

Monday: 2006 units x $ 0.01306= $ 26.20 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Tuesday: 1007 units x $ 0.01306= $ 13.15 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Wednesday: 1006 units x $ 0.01306= $ 13.14 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Thursday: 2 units x $ 0.01306= $ 0.03 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Friday: 800 units x $ 0.01306= $ 10.45 (rounded off to two decimals) or $ 70 whichever is higher, hence, $ 70

Total weekly earnings: $(70+70+70+70+70)= $ 350.00

As required part 1) answer:

Weekly earnings of Travis: $ 376.56

Weekly earnings of Nessman: $ 398.12

Weekly earnings of Smithers: $ 350.00

Part 2)

a) Journal entries to record payroll after withholding taxes @ 10% of gross wages

Wages A/c Dr. 376.56

To Withholding Taxes A/c 37.66

To Wages Payable A/c 338.90

(Being amount recorded for Travis's wages and provisions made for withholding taxes and wages liability)

Wages A/c Dr. 398.12

To Withholding Taxes A/c 39.81

To Wages Payable A/c 358.31

(Being amount recorded for Nessman's wages and provisions made for withholding taxes and wages liability)

Wages A/c Dr. 350.00

To Withholding Taxes A/c 35.00

To Wages Payable A/c 315.00

(Being amount recorded for Smithers's wages and provisions made for Withholding taxes and wages liability)

b) Journal entries to record payment of payroll:

Wages Payable A/c Dr. 338.90

To Cash/Bank A/c 338.90

( Being payment made for Travis's wages)

Wages Payable A/c Dr. 358.31

To Cash/Bank A/c 358.31

(Being payment made for Nessman's wages)

Wages Payable A/c Dr. 315.00

To Cash/Bank A/c 315.00

(Being payment made for Smithers's wages)

c) Journal entries to record employers share of payroll taxes

As per the question none of the employees attain the maximum wages as per FICA thus there is no social security or Medicare deductions and neither there is unemployment taxes. Hence, even though the question asks for recording employers share of payroll taxes it is not applicable.

Note: I have not mentioned dates and ledger folio number in the journals as the same is not provided in the question